THOUGHT FOR WEDNESDAY 23RD JANUARY 2008
From top share author MALCOLM STACEY
Hello Crazy Types,
Well, a small bounce back. Quel Surprise! The big traders nearly always over-react, in my view. Not just here and the USA - but all over the world.
After all, China has a thumping good growth record. And yet their stock market falls 'cos of troubles in the US, which doesn't have a lot to do with how much China makes.
You can understand the UK market getting the jitters when the Americans do. Because we seem to have the same credit crunch troubles as they do. No quite as pronounced maybe, but we do have the same sort of issue to deal with. But the Chinese? And many other world economies? No, the American situation is no longer as important as it was.
And still the markets fall. Are we talking fear or fundamentals, here? Fear, I'm afraid.
The USA may already be in recession. The UK is not in recession. At the start of this century, which sounds an age away but wasn't, Britain avoided going into recession, whereas other countries were sucked into one.
We should avoid it this time round, too. We may not, but I rather think we will (not that my opinion amounts to a hill of beans, you understand).
If we avoid a recession, share prices will recover. They will recover, even if property prices fall, because share prices and brick and mortar often behave in opposite ways.
Remember gang that our inflation is still very low. That's why the Bank of England could make a small rate cut. Employment is high, too and though British spenders may have to tighten their belts, shareholders like us could still come out of this gloom in a rather happier mood. Maybe this is me being optimstic again, but in my experience things are never quite as bad as they seem. Rock on!
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